Swedish lockmaker Assa Abloy's Q2 profit beats expectations in challenging market

By Greta Rosen Fondahn

STOCKHOLM (Reuters) -Sweden's Assa Abloy reported better-than-expected quarterly profits on Thursday, crediting strong demand for upgrades in a challenging market, and the world's top lockmaker said it would keep fully compensating for tariff-related costs.

Its shares rose 6.5% by 0940 GMT, nearly erasing a year-to-date drop.

CEO Nico Delvaux told analysts that he was confident that the company could compensate for tariffs, mainly with price hikes, reinforcing his February message.

"The tariff cost increase was still limited in Q2 because we built up stock in the U.S. prior to all the tariffs kicking in. (The) price component will further grow in the second half of the year," Delvaux told Reuters.

He said that tariff-related price hikes would be isolated to the U.S. market, which accounted for 47% of group revenue last year.

To offset current tariff levels with pricing it would need to increase prices in the U.S. by 4%-5%, Delvaux told analysts.

The company, which competes with Allegion and Dormakaba, was also "working hard" to renegotiate with suppliers to get better deals, he said.

Assa Abloy produces 70% of its goods for the U.S. market there and imports the rest mainly from Mexico and China.

Operating profit fell 1.8% to 5.96 billion crowns ($611.7 million) from a year earlier in the second quarter, but it beat the 5.85 billion crowns analysts had expected.

Jefferies analysts said sales growth in the Global Technologies division as well as in the non-residential segment of the Americas division boosted results.

"We see strong growth in the aftermarket, fueled by robust demand for electromechanical upgrades," Delvaux said, in a statement, on the Americas division.

However, Assa described last quarter's market conditions as challenging, with sales declining in its EMEIA and Asia Pacific regional divisions.

A negative currency translation effect of 8% also weighed.

Adjusted for acquisitions, divestments and currency effects, however, sales grew by 3% to 38.0 billion crowns, which analysts said exceeded expectations.

($1 = 9.7436 Swedish crowns)

(Reporting by Greta Rosen Fondahn, editing by Anna Ringstrom and Tomasz Janowski)